Amendments to the Clearing Conditions, the Default Management Committee Rules and the Default Management Auction Rules of Eurex Clearing AG

1. Introduction

This circular contains information with respect to the service offering of Eurex Clearing AG (Eurex Clearing) and introduces amendments to the Clearing Conditions of Eurex Clearing AG (Clearing Conditions), the Default Management Auction Rules and the Default Management Committee Rules regarding the following topics:

The amendments under items A. to C. will become effective as of 2 June 2020.

The amendments under items D. to F. are subject to a Consultation, the Consultation will end on
27 May 2020. The planned effective date of these amendments is 25 June 2020, depending on the outcome of the Consultation which will be communicated in a separate Eurex Clearing circular.

2. Required action

The amendments to the Clearing Conditions of Eurex Clearing AG (Clearing Conditions) under items D. to F. are subject to a Consultation which will end with the expiry of 27 May 2020 (“Consultation Period”).

Eurex Clearing herewith invites all Affected Customers to submit comments on the proposed changes and amendments within the Consultation Period.

3. Details

In Eurex Clearing circular 113/19, Eurex Clearing announced Transitional Provisions under Chapter I Part 1 Number 18 of the Clearing Conditions with respect to Clearing Members who did not change (i) from Value Based Allocation to Asset Based Allocation or (ii) from the Individual Clearing Model Provisions to other clearing models with respect to all of their ICM Clients prior to 2 January 2020. As all Clearing Members have finished their migration from Value Based Allocation to Asset Based Allocation and all ICM Clients have finished their migration to another clearing model, these provisions will be removed from the Clearing Conditions.

To reflect the changes, the following provisions will be amended as outlined in Attachment 1:

• Chapter I Part 1 Number 18 of the Clearing Conditions

With this circular, Eurex Clearing exercises its termination right pursuant to Chapter I Part 1 Number 13.1.1 of the Clearing Conditions and terminates all tri-partite ICM Clearing Agreements (former Appendix 3 and Appendix 4 of the Clearing Conditions) entered into between Eurex Clearing, all Clearing Members and all ICM Clients as of 2 June 2020, provided that such ICM Clearing Agreements have not been terminated otherwise prior to the publication of this circular.

For the avoidance of doubt, as all ICM Clients’ clearing through Eurex Clearing has successfully migrated from the discontinued ICM to another clearing model, there are no open Transactions under any ICM Clearing Agreement. Further, whereas most of the ICM Clearing Agreements were terminated during the migration process, this circular only serves the purpose to ensure that no ICM Clearing Agreements remain and that the documentation status with the relevant Clearing Members and ICM Clients is completed in an orderly manner. Further, this termination only relates to the ICM Clearing Agreements in accordance with the former Appendix 3 and Appendix 4 of the Clearing Conditions. 

In case of a default of a Clearing Member, for omnibus segregated clients, Eurex Clearing will allocate the Eligible Margin Assets to the relevant Client Transaction Accounts of an Omnibus Standard Agreement for each Internal Omnibus Margin Account by application of the Allocation Algorithm. Any Eligible Margin Assets that are part of the Internal Omnibus Margin Account, but have not been allocated to an Omnibus Standard Agreement, constitute “Excess Collateral”. Excess Collateral in the form of cash constitutes an Unallocated Redelivery Claim.

Eurex Clearing is entitled to set off any Difference Claim it may have against the Clearing Member under an Omnibus Standard Agreement against any Unallocated Redelivery Claim owed by Eurex Clearing relating to Eligible Margin Assets allocated to the relevant Internal Omnibus Margin Account. For Eligible Margin Assets in the form of Securities which constitute Excess Collateral, amendments to the Clearing Conditions will ensure that Eurex Clearing is entitled to enforce and realise pledges over such Excess Collateral in satisfaction of the Difference Claim of an Omnibus Standard Agreement relating to the relevant Internal Omnibus Margin Account.

To reflect the amendments, the following provisions will be amended as outlined in Attachment 2:

• Chapter I Part 2 Subpart A Number 6.6.2 and Subpart C Number 9.4 of the Clearing Conditions

Eurex Clearing is reflecting current market conditions in the calculation of the relevant margin requirement. In order to be able to consider input from market participants, Eurex Clearing decided to introduce a liquidity survey with mandatory Clearing Member participation. During the survey, Clearing Members will be requested to provide bid-offer-spreads with respect to some or all Transaction Types (depending on the Clearing Licenses held by the Clearing Member) within three weeks after its receipt of the request from Eurex Clearing AG.

To reflect the amendments, the following provisions will be amended as outlined in Attachment 3:

• Chapter I Part 1 Number 3.1.3 of the Clearing Conditions

In line with the continuous development and improvement of the Default Management Process over time, Eurex Clearing introduced a variety of bidder roles for default management auctions. The proposed amendments to the Default Management Auction Rules seek to enable for Clearing Agents, clients and the Selected Auction Participant the selection of auction participation setup on Liquidation Group level and disclosure of affiliated relationship. 

Further, Eurex Clearing decided to align the auction participant selection criteria across all Liquidation Groups and to clarify that any specific auction terms can be amended by Eurex Clearing until the auction time expires. 

To reflect the amendments, the following provisions will be amended as outlined in Attachment 4:

• Numbers 3.3.1, 3.3.3, 3.4.1, 3.4.3, 3.6.1, 3.7, 4.3.2 of the Default Management Auction Rules
• Clearing Agent Participant Appointment Form
• Client Participant Appointment Form
• Bidding Agent Appointment Form
• Selected Auction Participant Appointment Form

In case of extraordinary circumstances when physical attendance in the Default Management Committee meeting is not enforceable, Eurex Clearing foresees to convene DMC meetings using remote access. The proposed amendments to the Default Management Committee Rules seek to provide clarifications with respect to this flexibility.

To reflect the amendments, the following provisions will be amended as outlined in Attachment 5:

• Numbers 3.1.3, 3.2.1-3.2.3 of the Default Management Committee Rules

Eurex Clearing proposes to shift the Default Management process provisions for the clearing of Basket Total Return Futures Contracts from Chapter II to Chapter I Clearing Conditions and to formulate the provision in a more generic way to open the scope of application of these provisions for future introduction of basket trades. 

The provision is proposed to be reformulated as follows:

If a Termination or a Basic Clearing Member Termination occurs with respect to a Clearing Member or Basic Clearing Member, (i) any Eurex Transactions of this Clearing Member or Basic Clearing Member that have been concluded as Basket Trades (Basket-Geschäfte) according to Number 4.3 (7) of the Eurex Trading Conditions and (ii) any corresponding Eurex Transactions of another Clearing Member or Basic Clearing Member which resulted from a matching of an order or quote of the Clearing Member or Basic Clearing Member with respect to which a Termination or a Basic Clearing Member Termination has occurred will be delinked from the respective Basket ID (as defined in the Eurex Contract Specifications), resulting in individual Eurex Transactions.

A further clarifying change of Chapter II Part 4 Number 4.1 is also envisaged.

To reflect the amendments, the following provisions will be amended as outlined in Attachment 6:

• Chapter I Part 1 Number 7.5.5 of the Clearing Conditions
• Chapter II Part 2 Number 2.25.7 of the Clearing Conditions
• Chapter II Part 4 Number 4.1 of the Clearing Conditions

Consultation with respect to the amendments proposed under items D. to F.

Pursuant to Chapter I Part 1 Number 17 of the Clearing Conditions, the proposed changes and amendments to the Clearing Conditions under items D. to F. are subject to a Consultation which will end with the expiry of 27 May 2020 (Consultation Period).

Eurex Clearing herewith invites all Affected Customers to submit comments on the proposed changes and amendments within the Consultation Period.

During the Consultation Period, comments on proposed changes or amendments shall be only submitted through a web-based commenting service for which a registration form is available on the Eurex Clearing website www.eurexclearing.com under the following link:

Resources > Forms > Data Forms Subject: Consultation Form

The form has to be duly signed and returned to Eurex Clearing via e-mail to SpecialProvisions@eurexclearing.com, in order to obtain a User ID and Password together with a link for accessing the web-based commenting service.

To the extent that Eurex Clearing decides to implement any comments received during the Consultation, the so-amended version of the Clearing Conditions will be published after the Consultation.

The currently envisaged effective date of the changes is 25 June 2020. However, after the Consultation Period, Eurex Clearing will issue a separate circular to announce the concrete date on which the proposed changes (as the case may be, implementing comments received during the Consultation) will come into effect. 

This announcement will be made with at least 15 Business Days’ notice (Regular Notification Period). However, if Eurex Clearing should receive a request for a Prolonged Notification Period from more than two Affected Customers during the Consultation Period, a Prolonged Notification Period as set out in the Clearing Conditions will be applied and Eurex Clearing will notify all affected parties accordingly.

Publication of amendments as outlined under items A. to C. 

As of the effective date, the full version of the amended Clearing Conditions, the Default Management Auction Rules and the Default Management Committee Rules of Eurex Clearing AG will be available for download on the Eurex Clearing website www.eurexclearing.com under the following link:

Resources > Rules and Regulations

The changes and amendments to the legal framework of Eurex Clearing AG published by this circular are deemed accepted by each affected contractual party of Eurex Clearing AG, unless the respective contractual party objects by written notice to Eurex Clearing AG within the first ten (10) Business Days after publication. Any ordinary right of Eurex Clearing AG to terminate the respective contract (including a Clearing Agreement, if applicable) shall remain unaffected.

Unless the context requires otherwise, terms used and not otherwise defined in this circular shall have the meaning ascribed to them in the Clearing Conditions or the Default Management Auction Rules or the Default Management Committee Rules of Eurex Clearing AG, as applicable.

Attachments:

• Attachment 1: Amended sections of Chapter I Part 1 Number 18 of the Clearing Conditions
• Attachment 2: Amended sections of Chapter I Part 2 Subpart A Number 6.6.2 and Subpart C Number 9.4 of the Clearing Conditions
• Attachment 3: Amended sections of Chapter I Part 1 Number 3.1.3 of the Clearing Conditions
• Attachment 4: Amended sections of Numbers 3.3.1, 3.3.3, 3.4.1, 3.4.3, 3.6.1, 3.7, 4.3.2 of the Default Management Auction Rules and
  o    Clearing Agent Participant Appointment Form
  o    Client Participant Appointment Form
  o    Bidding Agent Appointment Form
  o    Selected Auction Participant Appointment Form
• Attachment 5: Amended sections of Numbers 3.1.3, 3.2.1-3.2.3 of the Default Management Committee Rules
• Attachment 6A: Amended sections of Chapter I Part 1 Number 7.5.5 of the Clearing Conditions
• Attachment 6B: Chapter II Part 2 Number 2.25.7, Part 4 Number 4.1 of the Clearing Conditions

Further information